FinTech startups in the country attracted investments worth $1.2 billion during the first quarter of 2023, 55% lower than the $2.6 billion raised in the first quarter of 2022. However, this is a sharp jump of 126% compared to 523 million dollars collected in the country. fourth quarter 2022, according to details provided by Tracxn, a SaaS-based market intelligence platform.
Tracxn said in its Geo Quarterly FinTech India Report – Q1 2023 that in the FinTech space, India is the second highest funded geography after the US in Q1 2023, and ranks among the top five geographies in terms of total funding activities. However, funding is still on a downward trend compared to previous years, although there has been an increase in funding in recent quarters. The sector recorded late-stage investments of $977 million in the first three months of 2023, up 325% compared to Q4 2022, but down 44% from Q1 2022. Early funding during the quarter was 177 million, down 30% and 76% from Q4 2022 and Q1 2022, respectively. Seed-stage funding of $30.2 million was observed during this quarter, down 21% and 74% from Q4 2022 and Q1 2022.
Sequoia Capital, AngelList and Y Combinator are the most active investors in India’s FinTech space. Y Combinator, LetsVenture and Premji Invest were the top investors in Q1 2023. Y Combinator, 100X.VC and LetsVenture were the top seed investors. Xceedance, Telama Family Office and CourtsideVC were the top early-stage investors, while Premji Invest, General Atlantic and TVS Capital Funds were the top late-stage investors.
The FinTech sector observed six $100 million funding rounds in the first three months of 2023. Companies such as PhonePe, Mintify, Insurance Dekho and KreditBee raised funds over $100 million during this period.
According to the report, it was an uneventful quarter in terms of IPOs and unicorns. No companies from the FinTech area went public in Q1 2023, and there were no new entrants to the Unicorn club. However, there was a slight increase in acquisitions. The sector witnessed 11 acquisitions in Q1 2023, compared to six acquisitions in Q4 2022.
Among Indian cities, FinTech companies in Bengaluru take the lead, raising $796 million in the first quarter of 2023. This was followed by Mumbai and Gurugram, which raised $222 million and $151 million, respectively, during the quarter.
India continues to be an attractive market for FinTech investors for several reasons. Digital payment solutions have gained wide acceptance in the country.
According to figures released by the Reserve Bank of India (RBI), 128 million digital payment transactions worth $600 billion were processed in January 2023 alone. Some new regulations introduced in the country, such as limiting access to user data, among others, will help promote the security and privacy of users. Furthermore, the government’s push to promote a cashless economy combined with increasing internet penetration in both rural and urban areas has contributed significantly to developing this sector in the country.
